Standard Construction Contracts: Everything You Need to Know
Standard construction contracts are documents that put the obligations of both parties into writing, so they know what to expect as far as work is concerned.3 min read
Standard construction contracts, or construction agreements, are documents that put the obligations of both parties into writing, so the client knows what they should expect as far as work is concerned, and the construction contractor knows what to expect in terms of payment.
Many jobs, even larger ones, are often agreed upon over a contract as short as two pages, but this can be risky. If the project does not go as planned, whether it be due to cost overruns, excessive delays, substandard work, or anything else, there will be slim documentation to settle any contract disputes.
A lack of documentation is bad for both parties—the contractor might not get paid for the work that was done, and the client might not get the work that they paid for. Additionally, without clear terms set out from the start, there is a larger risk of minor disputes growing into larger ones, even lawsuits.
Therefore, use of standard construction industry contracts is recommended, as these have been used for years and been tested in the courts. They can also be easily adapted to specific projects.
Construction contracts furnished or written by construction contractor organizations, such as the Associated General Contractors of America (AGC), lean in the contractor’s favor, while those made by the American Institute of Architects (AIA) provide terms more favorable to the owners. However, either one will outline the correct details of the project, making the project easier for all involved.
AIA contracts are among the oldest contracts used and are the most common contracts used by architects. The AIA offers contracts for use in projects of all scale and kind, including design-build, cost-plus, and fixed-price.
Such contracts can be had in both electronic and hard copy form from the American Institute of Architects. PEM Software Systems also offers editable versions you can download.
Some of the contracts they provide include:
- A101, A102, and A103. These are standard construction contracts but are generally considered excessive for residential work.
- A105. A short-form contract more suitable for smaller, fixed-price projects.
- A107. Recommended for jobs operating with a time-and-materials basis. This contains dispute-resolution provisions that the A105 lacks.
- A132 and A133. More complex contracts that cover the responsibilities of the contractor, construction manager, architect, and owner.
Because AIA contracts tend to favor the owner, some contractors may not want to work with them, but those contractors who deal with architectural projects usually do not have a problem with them.
Other Standard Contracts
The AGC also publishes contracts akin to the AIA’s, although these generally favor the contractors. Contract forms (but not contracts) can be had from the National Association of Homebuilders (NAHB). These are published in a book called Home Builder Contracts & Construction Management Forms.
Whether you use AIA or AGC contracts or contracts based off of the NAHB forms, the most important step you must take is to read and understand the contract and make sure that it does not contain any clauses that could hurt you down the road. Comparing contracts to one another or consulting legal experts can be helpful in this regard.
Drawing Up Your Own Contract
Another option is to create your own contract, which can save you money, although you should have a lawyer review any contract before you sign it.
Using this method, it is most common to adapt and borrow clauses from different contracts to create the one that best suits your needs. A good base for your contract is the Building Advisor Model Construction Contract, as a construction attorney drafted it for the specific purpose of protecting homeowners in medium to large projects. Using a contract checklist can also help you in contract creation.
Clear, precise, and plain language is also best used for this task, although certain legal phrases are well established and should be used where relevant, such as “workmanlike manner,” “time is of the essence,” and “substantial completion.” The main goal is that both parties understand what is desired and how it is to be achieved. There is no need to try to impress people with complex legalese that may not be fully understood by either party.
A good contract should provide a clear roadmap to project completion and help prevent project disputes and lawsuits. It should also be in compliance with all laws.
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